Oil Price Forecasting Using Crack Spread Futures and Oil Exchange Traded Funds
Given the emerging consensus from previous studies that crude oil and refined product (as well as crack spread) prices are cointegrated, this study examines the link between the crude oil spot and crack spread derivatives markets. Specifically, the usefulness of the two crack spread derivatives prod...
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| Format: | Article |
| Language: | English |
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VIZJA University
2015-04-01
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| Series: | Contemporary Economics |
| Online Access: | http://ce.vizja.pl/en/download-pdf/id/385 |
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| _version_ | 1850165741960036352 |
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| author | Hankyeung Choi David J. Leatham Kunlapath Sukcharoen |
| author_facet | Hankyeung Choi David J. Leatham Kunlapath Sukcharoen |
| author_sort | Hankyeung Choi |
| collection | DOAJ |
| description | Given the emerging consensus from previous studies that crude oil and refined product (as well as crack spread) prices are cointegrated, this study examines the link between the crude oil spot and crack spread derivatives markets. Specifically, the usefulness of the two crack spread derivatives products (namely, crack spread futures and the ETF crack spread) for modeling and forecasting daily OPEC crude oil spot prices is evaluated. Based on the results of a structural break test, the sample is divided into pre-crisis, crisis, and post-crisis periods. We find a unidirectional relationship from the two crack spread derivatives markets to the crude oil spot market during the post-crisis period. In terms of forecasting performance, the forecasting models based on crack spread futures and the ETF crack spread outperform the Random Walk Model (RWM), both in-sample and out-of-sample. In addition, on average, the results suggest that information from the ETF crack spread market contributes more to the forecasting models than information from the crack spread futures market. |
| format | Article |
| id | doaj-art-e88feabf982c41e59ae766a9cce737ee |
| institution | OA Journals |
| issn | 2084-0845 |
| language | English |
| publishDate | 2015-04-01 |
| publisher | VIZJA University |
| record_format | Article |
| series | Contemporary Economics |
| spelling | doaj-art-e88feabf982c41e59ae766a9cce737ee2025-08-20T02:21:38ZengVIZJA UniversityContemporary Economics2084-08452015-04-0191110810.5709/ce.1897-9254.158385Oil Price Forecasting Using Crack Spread Futures and Oil Exchange Traded FundsHankyeung Choi0David J. Leatham1Kunlapath Sukcharoen2---Given the emerging consensus from previous studies that crude oil and refined product (as well as crack spread) prices are cointegrated, this study examines the link between the crude oil spot and crack spread derivatives markets. Specifically, the usefulness of the two crack spread derivatives products (namely, crack spread futures and the ETF crack spread) for modeling and forecasting daily OPEC crude oil spot prices is evaluated. Based on the results of a structural break test, the sample is divided into pre-crisis, crisis, and post-crisis periods. We find a unidirectional relationship from the two crack spread derivatives markets to the crude oil spot market during the post-crisis period. In terms of forecasting performance, the forecasting models based on crack spread futures and the ETF crack spread outperform the Random Walk Model (RWM), both in-sample and out-of-sample. In addition, on average, the results suggest that information from the ETF crack spread market contributes more to the forecasting models than information from the crack spread futures market.http://ce.vizja.pl/en/download-pdf/id/385 |
| spellingShingle | Hankyeung Choi David J. Leatham Kunlapath Sukcharoen Oil Price Forecasting Using Crack Spread Futures and Oil Exchange Traded Funds Contemporary Economics |
| title | Oil Price Forecasting Using Crack Spread Futures and Oil Exchange Traded Funds |
| title_full | Oil Price Forecasting Using Crack Spread Futures and Oil Exchange Traded Funds |
| title_fullStr | Oil Price Forecasting Using Crack Spread Futures and Oil Exchange Traded Funds |
| title_full_unstemmed | Oil Price Forecasting Using Crack Spread Futures and Oil Exchange Traded Funds |
| title_short | Oil Price Forecasting Using Crack Spread Futures and Oil Exchange Traded Funds |
| title_sort | oil price forecasting using crack spread futures and oil exchange traded funds |
| url | http://ce.vizja.pl/en/download-pdf/id/385 |
| work_keys_str_mv | AT hankyeungchoi oilpriceforecastingusingcrackspreadfuturesandoilexchangetradedfunds AT davidjleatham oilpriceforecastingusingcrackspreadfuturesandoilexchangetradedfunds AT kunlapathsukcharoen oilpriceforecastingusingcrackspreadfuturesandoilexchangetradedfunds |